Oil Price Fundamental Daily Forecast – Will Speculators Increase Long Positions Ahead of Weekend?

U.S. West Texas Intermediate and international-benchmark crude oil futures are edging higher on Friday, recovering from early session weakness. Both markets are in a position to post their first weekly gains in five weeks.

Prices are being supported this week by rising tensions between the United States and Iran, the hope of a trade deal between the U.S. and China, the possibility of an extension of the OPEC-led deal to limit production, a drop in U.S. stockpiles and expectations of lower U.S. interest rates.

At 09:07 GMT, August WTI crude oil futures are trading $57.22, up $0.15 or +0.24% and August Brent crude oil is at $64.76, up $0.31 or +0.51%.

Escalating Tensions in Middle East

Crude oil is trading higher on Friday amid concerns over escalating tensions between the United States and Iran. Investors turned defensive after the New York Times reported late Thursday that President Donald Trump approved military strikes on several Iranian targets, but surprisingly pulled back the order to launch the attacks.

According to the New York Times, Trump approved retaliatory military strikes against Iran on Thursday before changing his mind.

The New York Times, citing senior White House officials, says strikes were planned against a “handful” of targets.

“Planes were in the air and ships were in position, but no missiles had been filed when word came stand down,” the newspaper reported, citing an unnamed senior administration official.

According to the New York Times, top Pentagon officials warned a military response could result in a spiraling escalation with risks for US forces in the region.

The operation was called off after President Trump spent most of Thursday discussing Iran with his national security advisers and congressional leaders, according to AP reports.

Positive Events Lining Up for Bulls

In other news, the markets have been underpinned since Tuesday after U.S. President Trump tweeted he would meet with China President Xi Jinping at the G-20 summit in Osaka, Japan in an effort to jumpstart a trade deal between the two economic powerhouses.

Earlier in the week, traders turned optimistic that a deal would be struck between OPEC and its allies to extend the deal to limit production, trim the excess global supply and stabilize prices when the cartel meets to discuss the matter in late June/early July.

On Wednesday the U.S. Energy Information Administration announced a bigger-than-expected drawdown in weekly inventories. Later that day, the Federal Reserve made comments that opened the door for the first rate cut in more than 10-years.

Daily Forecast

The foundation is there for a rally today given all the positive developments this week. The rising tensions between the U.S. and Iran should underpin prices into the week-end. I’d be surprised if traders took profits ahead of the week-end given the uncertainty over current events. Speculative buying may actually increase into the close as traders bet on the worst outcome.